No need for a double take. Europe ETFs have recently been in
rally mode and, believe it or not, once-toxic European banks have
been contributing to that rally in significant fashion.
For example, Banco Santander (NYSE:
), one of the most controversial European banks and 19.5 percent
of the iShares MSCI Spain Capped ETFs (NYSE:
) weight, has surged 11 percent in just the past month.
Some top fund managers have been getting bullish on European
banks. "If you look at our portfolio, we're most overweight
Europe and within that, European financials," said David Herro,
manager of the $21 billion Oakmark International Fund, in a
interview earlier this week
Banks that Herro has recently purchased include Credit Suisse
), Lloyds, Allianz, Intesa Sanpaolo and BNP Paribas, according to
Europe ETFs Draw Bullish Praise
Investors looking to construct their own ETF portfolio chock
full of European banks have some interesting options, including
the following funds.
iShares MSCI Europe Financials ETF (NASDAQ:
) The iShares MSCI Europe Financials ETF is
not the most talked about Europe ETF
, but it is one of the better performers of the lot with a
year-to-date gain of 10.6 percent.
EUFN now has $182.5 million in assets under management, but
the fund stands as another shining example of
the risks associated with ignoring small ETFs
. Not only has the fund performed well this year, but the bulk of
its AUM total (over $142 million) has come into the fund since
the start of the year. Investors that got hung on EUFN's size
late last year missed out on some easy money.
) is EUFN's largest holding at 11.7 percent. Other top-10
holdings include Allianz, Credit Suisse and UBS (NYSE:
First Trust STOXX European Select Dividend Index Fund (NYSE:
) The First Trust STOXX European Select Dividend Index Fund is
not a dedicated financial services ETF, but the sector is the
fund's largest at 33.7 percent. That is roughly 1,400 basis
points larger than FDD's allocation to utilities stocks. As is
the case with most diversified Europe ETFs that heavy on bank
stocks, the U.K. and Switzerland loom large in FDD, combing for
48 percent of the fund's weight. France is in between the two at
The numbers pertaining to FDD are a compelling valuation
(price-to-book ratio of less than 1.4) and a juicy 30-day SEC
yield of nearly 6.4 percent. FDD is up 2.3 percent in the past
SPDR S&P International Financial Sector ETF (NYSE:
) With just $6.25 million in AUM, IPF might be too small for even
adventurous investors to handle, but most of the fund's 132
holdings would qualify as "heavily traded," ensuring decent
liquidity. That point is proven by the fact that IPF rarely
trades at a premium or discount to its net asset value of more
than half a percent,
according to State Street data
IPF is not a pure Europe fund as Japan, Canada, Australia and
Hong Kong combine for about 46 percent of the ETF's weight.
However, the U.K., Switzerland, Germany and France combine for a
third of IPF's weight and four of the ETF's top-10 holdings are
Europe-based. 30-day SEC yield: 2.25 percent. Price-to-book
For more on ETFs, click
Disclosure: Author is long FDD.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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